Chemical Profile: Europe engineering plastics

22 November 2013 10:00 Source:ICIS Chemical Business

Polyacetal, also known as polyoxymethylene (POM), is a versatile thermoplastic used in precision parts that require a lot of stiffness, low friction and excellent dimensional stability. It has been particularly successful in replacing metal parts. The automotive industry is the largest end-user. Other major outlets include consumer and office appliances, as well as the electronic industries. Uses are varied and include gear drives, pumps, conveyor belts, bathroom fittings, hand tools, toys, construction equipment, watch parts and medical devices.

Polybutylene terephthalate (PBT), a heat-resistant plastic, which shrinks very little during forming, is heavily used in the car, electronics and housing sectors. It is used to make items like car dashboards, rear view windows, showerheads and computer keyboards.

In Europe, the supply of POM and PBT has largely met demand, leading to a generally balanced market. Data from statistics agency Eurostat show that the total export of POM from Europe to the rest of the world was at 32,057 tonnes from January to August this year. This is up 2.5% from 31,288 tonnes exported over the same period last year.

POM imports into Europe have been very stable, showing only a 0.6% decline to 39,121 tonnes over January to August this year over the same period this year. No significant mergers and no large change in production capacity has occurred in the past six months.

Sources said that demand for both POM and PBT has been weak in the construction sector because of uncertainties in economic environment. This is being mitigated by continuous demand in the European car export market.

ICIS data show that POM and PBT prices have been stable since the second quarter of 2012, reflecting how prices were influenced more by the balance between supply and demand, rather than the movement of feedstock prices sources say. From the second quarter of 2012 to the fourth quarter of 2014, prices of methanol, a feedstock for POM, have risen 20%. Meanwhile, prices of butanediol (BDO), a feedstock for PBT, have fallen 7.7%.

Sources in the POM market have said the supply of cheaper material from Asia is making it hard for European producers to raise prices, thereby squeezing their profit margins as and when methanol prices rise.

In the PBT market, demand has largely been steady. This has nullified requests by buyers to cut prices amid the fall in BDO prices.

For the fourth quarter, POM contract prices rolled over from the third quarter, settling at a pre-discounted level of €2.20-2.30/kg FD (free delivered) NWE (northwest Europe). Fourth-quarter PBT contract prices also rolled over, settling at €3.15-3.16/kg FD NWE.

POM resins are made by the polymerization of formaldehyde to give the homopolymer. Copolymers are made by incorporating other monomers. The process is heavily capital intensive. The resin is highly crystalline in form, and the polymer chains have to be stabilized to prevent the resin breaking down during processing at elevated temperatures.

PBT is produced by the polycondensation of BDO with terephthalic acid or dimethyl terephthalate. Some companies are trying to modernise the production of PBT by using bio-based BDO, which is made from renewable feedstocks rather than petroleum.

Demand in the European POM and PBT markets is expected to be broadly stable in 2014, with no large deviation from current levels of supply and demand. Market participants have acknowledged that demand is being sustained by orders from European automobile makers, especially from German car exporters.

Nevertheless, the car industry is showing a split between carmakers that see increasing demand in the export market, and carmakers that see flat to lower demand in the domestic market in Europe.

The latest figures from the European Automobile Manufacturers’ Association show that new EU car registrations from January to October this year dropped 3.1% compared with the same period last year. However, this is being mitigated by a rise in car exports. Eurostat data show that car exports from the EU to the rest of the world increased to over 3m units in the first half of 2013 from 2.88m in the first half of 2012.

Producers are more bullish about demand next year, expecting modest rises, broadly tracking a forecast by the European Commission of a 1.4% rise in EU GDP in 2014. However, some buyers with customers in countries like Spain, Italy and Portugal – markets hit hard by the financial crisis – expect demand to fall slightly.

By Vladimir Guevarra